Hugo Chavez: For all of his fiery anti-American rhetoric, Florida trade with Venezuela has increased over his eight years in office.

Earlier this year, Hugo Chavez, the fiery, anti-American president of Venezuela, unexpectedly announced he was slashing U.S. air service to his country. Venezuela's National Aviation Institute would ban all Continental and Delta flights and cut American Airlines flights by half. The ploy was no random broadside. Chavez was irked at a decade-long policy by the U.S. Federal Aviation Administration that prohibited Venezuelan carriers from adding flights to the U.S. because of concerns over the country's airsafety procedures.

Chavez's tactic worried Florida executives and professionals who do business with Venezuela, the state's third-largest trade partner. Raul Lopez-Perez, executive director of the Venezuelan-American Chamber of Commerce in Miami, told the South Florida Sun-Sentinel the move would "have a very negative impact on trade and business," including the loss of jobs in both south Florida and Venezuela. He said his group likely would have to cancel the upcoming ExpoVenezuela trade show, especially if buyers could not count on reliable future transport of goods.

Three days after his threat, Chavez delayed the ban to allow talks with U.S. carriers and the FAA. Ultimately, he got what he wanted: After sending a team to Venezuela, the FAA increased the country's safety rating, effectively allowing the Venezuelan carriers into the U.S. market.

To Gov. Jeb Bush and many others, the episode is vintage Chavez. The Venezuelan leader injects lots of bluster into the trade picture and rants against U.S. capitalism, but he's no real threat to business. "To use a Texas expression," the governor says, Chavez is "all hat and no cattle."

And, in fact, Florida's trade with Venezuela and the rest of the region has continued to climb over the course of Chavez's eight years in office. But Chavez is just the most visible crest of a wave of neo-populist leadership that has washed through Latin America. Not all of the new leaders mimic Chavez's antics or anti-Americanism, but most support policies they feel will protect their domestic economies and seem less inclined toward free-trade initiatives.

To what extent the political trends will slow the free-trade momentum built over the past decade is an open question. Protectionism -- on both sides of the border -- has shelved dreams, first expressed during the Summit of the Americas in Miami a dozen years ago, of creating the hemisphere-wide trade pact known as the Free Trade Area of the Americas. Whether neo-populism also will hobble the more recent idea of a slimmed-down "FTAA of the willing" remains to be seen.

Most, however, believe the free-trade door won't open as wide as they once hoped. At the very least, neo-populism has shaded the trade picture with uncertainty for those who do business in Latin America. Many Florida businesspeople grow skittish when asked to comment on political developments in the region. But those willing to talk say it's a mistake to pretend that the shifting political environment -- and several other potential "wild cards" [left] -- hasn't also changed Latin America's business climate.

"I used to think 'all hat and no cattle' too, but I don't think you can say that anymore," says Terry L. McCoy, director of the University of Florida's Latin American Business Environment Program, which analyzes the region's business outlook each year. Leaders such as Chavez and Bolivia's Evo Morales have enormous oil and gas resources and aren't afraid to use them as leverage. "These guys know what they're doing."

Wild Cards
Along with populist politics, wild cards that could influence trade and business relations in Latin America include:

? IMMIGRATION REFORM: Florida's top three industries -- tourism, agriculture and home building -- all will suffer if Congress passes a hard-line immigration reform bill. Meanwhile, the negative tone of the debate in Washington and around the nation has chilled the normally warm business relationship between Mexico and the U.S.

? CHINA: China's hunger for commodities is helping fuel the global economy and lifting commodities prices, keeping Latin America's economy healthy. But in the long term, China's efforts to build supply relationships with providers such as Brazil and Venezuela could affect Florida and the U.S. by diverting trade.

? ECONOMIC DOWNTURN: Latin America is enjoying a sustained economic recovery, with four straight years of exportled growth, low inflation and increasing foreign investment. But historically the region's economic peaks have been followed by steep dips. Some countries may respond to an economic downturn by becoming more protective and less marketoriented.

? CUBA: Just when Fidel Castro's handover of power gave Florida businesspeople hope his reign might end and investment in Cuba might begin, Venezuela's Chavez is working to save the socialist regime. Venezuela exports 90,000 barrels of oil a day to the island nation at favorable rates. A White House report on the likelihood of Cuba's transition to democracy says Venezuela is helping "build a network of political and financial support designed to forestall any external pressure to change."

Left-hand turn
Chavez's 1998 victory in Venezuela -- he is expected to be re-elected Dec. 3 -- has been followed by a string of other wins by left-leaning candidates and parties: Luiz In?cio Lula da Silva -- popularly known as Lula -- and his Workers' Party prevailed in Brazil in 2002 and won in a re-election runoff last month; Néstor Kirchner was elected in Argentina in 2003; and Tabaré V?zquez in Uruguay in 2004.

This year, two more left-leaning presidents were inaugurated: Bolivia's Morales in January and Michelle Bachelet, the first woman president of Chile in March. However, three neo-populist contenders, Ott?n Sol?s in Costa Rica, Ollanta Humala in Peru and Andrés Manuel L?pez Obrador in Mexico, lost by small margins -- in Humala's case, perhaps because of Chavez's support for his candidacy.

The new leaders all have tapped into popular beliefs that open market reforms and free-trade agreements, including the North American Free Trade Agreement (NAFTA), have helped foreign investors far more than Latin America's poor. But the leaders fall into two quite different camps. Lula and Bachelet, social democrats, have steered their countries down a more centrist path. While they champion social policies, they "have implemented them in a very responsible way, which rather than scare away capital and damage domestic confidence in the economy and antagonize the private sector, has actually reassured foreign and domestic investors and maintained that good relationship," says Manny Mencia, senior vice president for international business development at Enterprise Florida.

Others, such as Morales in Bolivia and several now running for office, have fashioned themselves in Chavez's neo-populist mold. They're seen as less predictable and more likely to make moves calculated to appeal to anti-U.S. sentiment, such as imposing protectionist tariffs, actively fighting trade agreements or even nationalizing some industries. A victory for front-runner Daniel Ortega in Nicaragua in the Nov. 5 presidential election, for example, "would seriously unsettle the business environment," says McCoy.

Short-term gains
In the short term, the trends in the region actually have stimulated some business between Florida and Latin America -- particularly with Venezuela. Rich with oil revenue in the wake of Chavez's creeping nationalization of the oil and gas industries, Venezuela has been the fastest-growing market for Florida exports over the last three years. Total bilateral merchandise trade with Venezuela was up 41.6% between 2004 and 2005, according to Enterprise Florida. Florida's top export to Venezuela: Electronics. Venezuela's to Florida: Oil. No. 2 going both ways: Motor-vehicle parts.

In addition to buoying Florida's export trade, Chavez's policies have been a boon to south Florida's banking, real estate and other industries, as Venezuelan nationals move assets here. Francisco Cerezo, a partner in the Miami law firm Tew Cardenas who practices corporate and international law, says that "in Venezuela, you see a fear that things are getting worse, so you see people who can do so investing more in the U.S., opening bank accounts, moving assets into Florida."

In addition to buying second homes, Cerezo says, many wealthy Venezuelan business owners in recent years have launched operations in Florida partly to obtain visas. "They're spending a couple of million dollars just to make sure they can get a foothold here," he says.
Longer term, however, the trade picture in Latin America could darken. The prevailing political winds make it more likely that an economic slowdown would spur a protectionist backlash, for example. The region has seen steady economic growth since 2003 -- the longest period of sustained growth in decades, says McCoy. But historically, the area's economic fortunes have been like a roller-coaster ride: Highs can be followed by surprising dips.

Florida executives are reluctant to go on the record with concerns about the region, particularly as they do more business with the very governments whose tilt now concerns them. But lawyers and other professionals say their clients fear both a general retreat from bloc trade agreements as well as specific protectionist policies that would make foreign investment more difficult: Higher tax rates and tariffs and strict limits on the percentage of foreign equity investment in business, for example.

Far and away Florida's largest trading region globally, Latin America is the focus of the majority of the 30,000 companies in the state with international operations ["Exporting Florida's Goods," page 63]. Ninety percent of those companies are small businesses -- and among the small businesses, Latin America is often the sole focus of operations. The companies range from the numerous Miami-based law firms with offices throughout the region, to commercial developers building retail centers in countries such as Mexico, to hundreds of exporters that sent $6 billion worth of computers and electronics to Latin America in 2005 alone.

International corporate lawyer Francisco Cerezo says his clients "breathed a huge sigh of relief" after conservative candidate Felipe Calder?n was elected president of Mexico.

Uncertainty about the future was reflected in a non-scientific poll conducted earlier this year by WorldCity, a Coral Gables-based media company that analyzes international trade. WorldCity queried four dozen south Florida executives in charge of their companies' operations in Latin America about how the leftward political shift is impacting business. The results: 36% said it's had no noticeable impact; 12% said it's had a negative impact; 12% said it's had a positive impact; and 40% said it's too early to tell. So far, the businesses most severely affected by the neo-populism are multinationals such as oil and gas corporations. This year, for example, following Venezuela's moves to nationalize oil and Bolivia's threatened nationalization of hydrocarbon assets, Ecuador expropriated the assets of Occidental Petroleum Corp., which had invested more than $1 billion in the country since 1999.

Smaller foreign investors have been affected, too -- for example, when the Venezuelan government seized land "citing irregularities in their ownership status and claiming they were not being used productively enough," according to the Heritage Foundation's annual Index of Economic Freedom. John G. Murphy, vice president for international affairs at the U.S. Chamber of Commerce, warns that seizure of private assets and property could become more common: "An ambiguous attitude toward property and contracts, coupled with the sudden wealth arising from oil, gas and commodities in the region, makes for a volatile mix," Murphy writes. "More and more governments face the temptation to reach out and seize assets, discard contracts and change the rules of the game under which foreigners have made investments."

Cerezo, the international corporate lawyer, says changing rules was a big worry among his clients in Mexico, who "breathed a huge sigh of relief" when conservative candidate Felipe Calder?n squeaked by Obrador in the closest presidential election in that nation's history. Obrador, the former mayor of Mexico City, argues that trade agreements have been a bad deal, particularly for the poor. During his campaign, he vowed he would not honor some requirements of NAFTA, such as the 2008 elimination of Mexico's tariffs on corn and beans.
UF's McCoy says although Calder?n ultimately won, the fact that the margin was so close -- he won by only six-tenths of 1% -- and the fact that Obrador disputes the results could still mean a less-enthusiastic Mexican business climate. Calder?n's support simply may not be wide enough to push needed economic reforms, such as opening the energy sector to private investment, McCoy says.

Another long-term issue for Florida- based business is the emergence of China in the Latin American marketplace. Chinese imports from the area increased 600% to $21.7 billion from 1999 to 2004. President Jiang Zemin paid a two-week visit to the region in 2001. China's hunger for commodities is helping fuel the global economy and lifting commodity prices, which helps keep Latin America's economy healthy. But in the long term, China's current efforts to build supply relationships with providers such as Brazil and Venezuela could affect businesses in Florida and the U.S. "Everyone," says Mencia of Enterprise Florida, "is keeping an eye on China."

The future
For the time being, Latin America seems to be "taking a breather from free trade and globalization," says Mc- Coy. "There's nobody out there with a coherent story about why we should be doing it who is also willing to make the political sacrifices." Some Florida FTAA boosters insist the dream of a hemispheric trade bloc will someday come true, Miami headquarters and all. But few experts and executives who do business in Latin America believe that anymore.
Jorge L. Arrizurieta, Florida's former FTAA president who this year joined Akerman Senterfitt as chief of the firm's international policy group, is trying to build support for a slimmed-down trade agreement that doesn't include all the countries in the hemisphere -- the so-called "FTAA of the willing." The willing, based on a count at the IV Summit of the Americas in Mar del Plata, Argentina, last fall, includes 29 nations but not heavyweights Argentina, Brazil, Paraguay, Uruguay and Venezuela. Other countries, such as Bolivia, are sure to join the holdouts given new leadership. "No matter the number of willing nations that emerge," Arrizurieta says, "a movement should press forward with those who see the benefits of trade while keeping the door open to outside nations who will eventually wish they were in the partnership."

"An ambiguous attitude toward property and contracts, coupled with the sudden wealth arising from oil, gas and commodities in the region, makes for a volatile mix."

Arrizurieta says the FTAA should never have been viewed as an all-or-nothing proposition -- perhaps the mistake of its early enthusiasts. The very process, he says, led to crucial trading partnerships that now encompass much of the hemisphere anyway, including Mexico, Chile and the nations under the U.S.-Dominican Republic-Central America Free Trade Agreement, known as DR-CAFTA (although Costa Rica has yet to ratify it). Other trade deals are under way between the U.S. and Colombia and the U.S. and Peru -- neither of which has made its way past Congress yet.

Indeed, left-leaning Latin American countries aren't the only ones playing the protectionist card. Brian C. Dean, the new executive director of Florida FTAA, points out that DR-CAFTA passed Congress by only two votes. "We have our own variant of populism and nativist tendencies that make trade agreements unpalatable to many in Washington who don't have the wholistic view you see in Florida's congressional delegation," says Dean. "I don't think it's just Hugo Chavez. We need to improve the political discourse in our own country so that people understand the benefit of open markets."
Case in point: The U.S. refusal to bend on agricultural tariffs, including some that help Florida farmers, was perhaps the greatest blow to a possible pact with Brazil. Gov. Bush and others are working to strengthen partnerships and trust with key countries to jump-start negotiations on the FTAA. Bush views his "15 by 15" ethanol initiative as a benefit to both the U.S. and Brazil, Florida's largest trading partner, which produces 4 billion gallons of ethanol a year. The initiative would set a U.S. consumption goal of 15 billion gallons of ethanol a year by 2015, tripling current use. To accomplish the goal, which would help the U.S. wean itself from oil, Bush wants the U.S. to negotiate a trade agreement on ethanol imports from Brazil. While oil comes in duty-free, the U.S. imposes a 54-cents-a-gallon tax on imported ethanol.

Free markets will withstand the neopopulists, predicts Ken Roberts, president of WorldCity. But future pacts like the ethanol plan are likely to happen one step at a time. "It was maybe presumptuous to think we could ever get (the original 34 FTAA nations) to agree," Roberts says. "But business marches on. Ultimately, businessmen are going to do business, and politicians are going to do politics."
Jim Bacchus, the former Florida congressman who served as chairman of the appellate body of the World Trade Organization, says critics are correct that free trade alone won't immediately or automatically raise the living standards of the poor. Rather than ignore or brush off the rise of anti-American, anti-business politicians, he says, Florida and U.S. leaders should pay increasing attention to the political winds in Latin America. "It's vitally important that trade be accompanied by the kind of economic initiatives that allow all people to benefit from trade."